Correlation Between EROAD and Challenger
Can any of the company-specific risk be diversified away by investing in both EROAD and Challenger at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining EROAD and Challenger into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EROAD and Challenger, you can compare the effects of market volatilities on EROAD and Challenger and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in EROAD with a short position of Challenger. Check out your portfolio center. Please also check ongoing floating volatility patterns of EROAD and Challenger.
Diversification Opportunities for EROAD and Challenger
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between EROAD and Challenger is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding EROAD and Challenger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Challenger and EROAD is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on EROAD are associated (or correlated) with Challenger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Challenger has no effect on the direction of EROAD i.e., EROAD and Challenger go up and down completely randomly.
Pair Corralation between EROAD and Challenger
Assuming the 90 days trading horizon EROAD is expected to under-perform the Challenger. In addition to that, EROAD is 2.06 times more volatile than Challenger. It trades about -0.07 of its total potential returns per unit of risk. Challenger is currently generating about 0.16 per unit of volatility. If you would invest 609.00 in Challenger on November 5, 2024 and sell it today you would earn a total of 23.00 from holding Challenger or generate 3.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EROAD vs. Challenger
Performance |
| Timeline |
| EROAD |
| Challenger |
EROAD and Challenger Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EROAD and Challenger
The main advantage of trading using opposite EROAD and Challenger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EROAD position performs unexpectedly, Challenger can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Challenger will offset losses from the drop in Challenger's long position.| EROAD vs. Regal Funds Management | EROAD vs. Pearl Gull Iron | EROAD vs. Bisalloy Steel Group | EROAD vs. Tombador Iron |
| Challenger vs. Clime Investment Management | Challenger vs. Talisman Mining | Challenger vs. Ora Banda Mining | Challenger vs. K2 Asset Management |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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